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Wednesday, December 9, 2015

Daily update 12/9

A little more down.

The close below yesterday's low confirms the break of the 200 SMA.  It also turns the short term trend down.  This year that has usually meant it was time to rally.  Today was a very odd day.  The bulls came out this morning and went on a buying spree causing breadth to get to +74%.  When SPX hit the 15 minute 200 SMA the sellers let loose.  SPX went spiraling down and breadth went to -64%.  That is quite a significant reversal.  There must have been some big portfolio adjustments going on.  There was a bit of a bounce late in the day that brought the breadth up to -59%.  There were only 28 new highs.  New lows dropped down to 165.  Strength in the energy sector today lowered the new lows quite a bit.  Oddly the TRIN closed at .69.  We still have not had a high TRIN reading in this pullback.

The futures tested the 12/3 low and held for today.  They are actually up a few points at the moment.  They tested the 20 and 50 SMAs this morning and got soundly rejected.

The red count jumped up today and is well above where it was on 12/3 when we were in the same area.  This could be interpreted as a slight oversold condition at potential support.  On the other hand, it could mean that with the daily charts of nearly 70% of SPX now red the market is ready to go down for real.  Which will it turn out to be?

Pretty much all year long every time the market looked like it was getting ready to make a sizable move in one direction or the other it would reverse.  It is now in position where it could take a tumble.  That probably means the bulls are about to show up and take it higher.  Market internals are showing massive divergences.  Here is an example.

The cumulative volume index has been diverging from SPX since July 2014.  As you can see since mid Oct. it has been really, really diverging.   This may be the biggest divergence over a few weeks I have ever seen.  Very odd.

There is the conundrum.  The market internals are exceptionally weak, but seasonality is strong.  I have been wondering if that is why the FED chose to raise rates in mid Dec.  Everyone knows the last half of Dec. is one of the most bullish time periods of all.  Hmm.  I don't know what is going to happen here, but there could be some volatility.


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